Auto Inc. not impressed with the Infra cess

These are over an above a cess of 1 per cent on petrol/ LPG/CNG driven vehicles of length not exceeding 4 meter and engine capacity not exceeding 1,200cc.

PTI

Updated: March 01, 2016, 09:57 IST

NEW DELHI: Car prices are set to go up, ranging from Rs 2,000 on mass market vehicles to over Rs 1 lakh on big diesel SUVs and sedans as finance minister Arun Jaitley decided to levy 'infrastructure cess' of up to 4%, a move that made industry players fume.

Singling out diesel vehicles, in the aftermath of pollution problems in the Capital, Jaitley decided to impose 2.5% cess on diesel vehicles of length not exceeding 4 meter and engine capacity not exceeding 1,500cc, while higher engine capacity and SUVs and bigger sedans were slapped a cess of 4% on the value of the car.

These are over an above a cess of 1 per cent on petrol/ LPG/CNG driven vehicles of length not exceeding 4 meter and engine capacity not exceeding 1,200cc.

Reacting to the proposals, Maruti Suzuki Chairperson RC Bhargava said: "Obviously it will lead to rise in car prices. It came as a surprise for us as we were not expecting such kind of a cess."

Lamenting Jaitley's announcements, Bhargava said: "For pollution, we have already been asked to get to Euro 6 emission norms by 2020. It involves substantial amount of investment and would also add to the cost of vehicles. In addition, this additional cess, when cars contribute only around 2% of the air pollution, comes as a surprise for us." He, however, declined to comment on the quantum of the price hike.

According to industry estimates, as a result of the cess the increase in prices could range from Rs 2,500 on entry level small cars such as Maruti Alto or Tata Nano and can go over a lakh of rupees on high-end vehicles which are priced above Rs 30 lakh.

Hyundai Motor India Ltd (HMIL) senior vice-president (marketing and sales) Rakesh Srivastava said the infrastructure cess has come as a "dampener" for the auto industry. "The auto industry has been experiencing growth challenges and there was an expectation of a scrappage scheme to remove high emission and low mileage vehicles. The taxation (infra cess) has come as a dampener and will effect demand, creating challenges towards sustainable growth," he said.

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